Embodiments of the present invention relate to providing emergency cash to a customer, and more specifically to providing a conditional emergency reserve to a customer based on actuarial information.
Emergency situations related to loss of income put many people in situations that they are not ready for. A very large percentage of the American population lacks the appropriate resources to deal with an interruption in income. Many within this population do have access to credit, but in many cases that credit is maxed out. A significant portion of that overall subset falls into the Low-FICO/Thin Credit File/No Hit File category which has even fewer reputable, easy to access, non-usurious options for obtaining credit. Many banks' own credit underwriting standards exclude a very large portion of its own population. These banks are only able to extend a pre-approved credit offer to a small percentage of new Checking Account applicants.
The inability of many people to handle loss of income has been widely published. For example: “[a] one week delay (in pay) would cause 40% of American workers to cut back on critical payments, including rent, mortgage, credit card and utility bills” (Source: ADP Payroll Services Survey); “[n]early one-quarter (22 percent) of U.S. respondents said that once they have covered their basic living expenses, they have no money left over” (Source: ACNielsen Online Consumer Confidence Survey, September 2006); and also almost one-half of all U.S. adults (45%) say their household does not have enough money in liquid savings to cover at least 3 months of living expenses (Source: Harris Interactive nationwide survey of 2,328 adults, February 2006). Most recently a GFK Roper survey of Americans' emergency savings commissioned by Brankrate reported that 54% do not have an emergency savings fund established (Source: Brankrate.com, Jul. 23, 2007).
Customers who do not currently have enough in savings to cover themselves and their families during a period of income interruption are, for the most part, faced with the following options:
TABLE 1Source: Center for Responsible LendingOptionAverage APRAvailabilityFamilyNADependent on a number of factors,but in most cases family isnot a viable optionUnsecured Loans≧30%Limited to those who have a goodcredit history and proven meansof repaymentPay Day Lending300%-500%Current employment requiredTitle Loans200%-400%Must be sole owner of the vehiclePawn Shops100%-200%availability limited only by theamount of pawnable goodsthe customer ownsCredit Cards≧34%Limited to those who have goodcredit and available credit